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Home› Part II - Political economy propositions› Chapter 8 - Distribution›Proposition 8.4
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8.4 Total labor income (TLI) is what remains of total income (TI) once total placement income (TPI) has been formed.

1. Since by definition TI = TPI + TLI, one of the two proportions determines the other.

Solution 1 : the TLI / TI proportion determines the TPI / TI proportion.

Solution 2 : the ratio of TPI / TI determines the proportion of TLI / TI.

2. Only the second solution is consistent with what the previous proposition indicates.

This indication is that of the two refusals by which society governs the distribution of total income (TI) over the long term. This is why TLI is a remainder, because of the insufficiency inherent in it: TLI = TI – TPI.139

3. The methodological and policy status of the TLI = TI – Equation is the same as that of the EPCE feedback.

This status is also the same as that of the previous proposition: normative.

4. To consider that profits cut wages by the same amount Wage is correct on one condition.

It is on a macronomic scale that this happens. There, the total profits contribute, together with other placement income, to the reduction of total labor income, including that received by wage-earners other than those of enterprises.

5. The earnings made by an enterprise, and therefore the profits it pays, do not necessarily reduce the wages of that enterprise's staff.

Here we are on the mesonomic scale. The wages paid by an enterprise may have been and remain at the level of those of the employers who pay their staff the most. Enterprise by enterprise, there is not necessarily more reduction of earnings by any increase in the wage bill.

6. The macronomic proposition "total placement income reduces total income from work by the same amount " is correct.

But the mesonomic proposition is false: "the profit distributed by an enterprise reduces the enterprise's payroll by the same amount".

Notes

  1. This closure of the distribution coincides with the one Sraffa proposes. Marx, and Ricardo as commonly read, take the wage as given and profit as the residue. Sraffa reverses the order: the rate of profits, “as a ratio, has a significance which is independent of any prices, and can well be ‘given’ before the prices are fixed”, and the wage becomes the residue (P. Sraffa, Production of Commodities by Means of Commodities, Cambridge University Press, 1960, §44). The two constructions diverge on what fixes the given term. Sraffa suggests “the level of the money rates of interest”. The Objective Political Economy fixes it by the sufficiency of total placement income (Proposition 8.2) and the two refusals of the social body (Proposition 8.3), and makes the rate of profit on capital the director of interest rates (chapter 10). Fabra sides with Ricardo: the rate of interest is determined by the rate of profit, not the reverse (P. Fabra, Capital for Profit, Rowman & Littlefield, 1991, pp. 335–338). See the appendix Objective Political Economy and Sraffa. ↩
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